Bogleheads.org

I'm aware of how I have to do the withdrawals from previous questions here and a very useful Morningstar article. My only question was the actual process of doing the withdrawal. Do I just make the withdrawals and then submit paperwork to the IRS next April? Or do I need to do something else? Request the distribution, and you will get a 1099R next January showing the amount distributed. This simply goes on lines 4a and 4b of your 1040 like any other IRA distribution. There is no separate form or schedule to be added in most situations. However, if the inherited IRA included non deductible contributions made by your father, you inherited those amounts and you would need Form 8606 to break out the already taxed amount. This will reduce your ...

paramedic wrote: ↑Sat Mar 18, 2023 7:30 pm Hi everyone!

I reached out to a Vanguard rep through work, and after 3 days of him researching the options, he advised that they were able to reclassify it for me. This has now reflected online. Thanks again for the advice.

Good news. I assume you also checked your on line account to verify that the contribution shows up as a regular contribution for the correct year (2023).

When the 1099R for 2023 is entered into a tax program, the taxable income should show up on line 1h of Form 1040. Prior to 2022 it was added to line 1 wages, but Form 1040 now breaks out the wage income into several components that get different treatment.

These amounts should never show on lines 5a and 5b (plan distributions) of your 1040. If they do either the 1099R or the entry of the 1099R data is incorrect.

Sec 72(q) lists all the NQ annuity penalty exceptions: (q)10-percent penalty for premature distributions from annuity contracts (1)Imposition of penalty If any taxpayer receives any amount under an annuity contract, the taxpayer’s tax under this chapter for the taxable year in which such amount is received shall be increased by an amount equal to 10 percent of the portion of such amount which is includible in gross income. (2)Subsection not to apply to certain distributions Paragraph (1) shall not apply to any distribution— (A)made on or after the date on which the taxpayer attains age 59½, (B)made on or after the death of the holder (or, where the holder is not an individual, the death of the primary annuitant (as defined in subsection (s)...

What are the benefits of an MBR even if we are only allowed to do in plan conversions instead of the option of in service distributions? My plan is to roll that money to a Roth IRA once I leave the company (although I think - plz confirm) that I would be taxed on the earnings once I did that. 1) Should I still contribute to the MBR in my circumstances even though I don't have the option to do in service distribution to IRA? What are the pros/cons? Yes, but perhaps not as much if there is a decent chance you will need to tap this money while still working there. Or if the plan offers loans, you might apply if the need is that great. 2) Once I leave my company in 5-10 years, should I still roll that money to an IRA even if taxed on the earni...

Note all the penalty exceptions on the following IRS rollover chart, second column: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions Every one of these exceptions will waive all or part of the 10% penalty for distributing taxable portions of a Roth conversion in the first 5 years or for distribution of Roth gains. Age 59.5 is the predominant exception, but disability and several other exceptions apply that can be claimed on Form 5329. Secure Act 2.0 also eliminates the penalty on all gains distributed with returned IRA contributions by the due date. This is effective immediately, even if the returned contribution is for 2022. Of course, now that we all have losses, the penalty is wa...

Does your spouse face a similar issue?

Are you sure that filing MFS is a net benefit and the reasons for doing so at first still exist? If not, you can amend prior returns to MFJ and avoid all this. In addition, you might get refunds.

Hey guys my wife has 2 smaller 401k accounts from pervious employers. With typical 401k account fees should I roll these into something else or should I let them alone. The accounts have been holding their own and doing pretty well but I was thinking long term with 401k fees. Thanks for your advice. A financial advisor told me a few years ago to not worry with rolling them anywhere and just don't forget about them basically. Just getting everyone's opinion. If any of these accounts are less than 7000 in value, I would consolidate them into her current plan or an IRA if she tends to have shorter term jobs. Sec 304 of Secure Act 2.0 increases the old limit for mandatory distributions a plan can require from 5000 to 7000 effective in 2024. To...

Thank you! Thank you! Thank you! So glad I won't have to talk to Vanguard again on this. I also had excess contribution for mine for 2021 but since I hadn't made my 2022 contribution I used the 2021 for mine. I know I too will have to fill out a 5329 and pay the 6% excise. Can we do that on one 1040X as married filing jointly or will we each need to do one? We actually probably had losses since it was in a GNMA account, but will just be glad to get this behind us. For late corrections of excess contributions, Form 5329 includes the two options of correction by distribution (husband on line 20) and absorption (you on line 19). So he is using one method and you the other method. But since you are not taking a distribution, only his distribut...

The subject of taxpayer "elections" with respect to various distribution options has never been clearly spelled out by the IRS. These elections (eg spousal ownership assumption, LE vs. 5 or 10 year rule, and now EDB election into the 10 year rule) are made with the plan custodian in a form and time limit that may or may not be clearly stated in the plan document. While IRS contracts are similar, qualified plans often contain more restrictive measures than the IRS allows, including election mechanisms. The following is copied from IRS Reg 1.401(a)(9)-3, QA 4: (c) Elections. A plan may adopt a provision that permits employees (or beneficiaries) to elect on an individual basis whether the 5-year rule in section 401(a)(9)(B)(ii) or th...

IRA basis is a dollar amount.

1) If the total IRA values declines due to investment results and you then convert, your basis will be a higher % of the conversion and you will owe less tax on the conversion. You will have less basis remaining for future years in this situation per line 14 of Form 8606.

2) If total IRA values increase due to investment gains and you convert, your basis will be a lower % of the conversion and the taxable portion of the conversion will be higher. You will have more basis remaining for future years due to these gains per line 14 of Form 8606.

If you withdraw the entire balance of all your Roth IRAs (eg 6000) and the distribution is less than your contributions (eg 7000): 1) If your Roth is qualified (5 years and 59.5), you would report the amount distributed (6000) only on line 4a of Form 1040. 2) If your Roth is not qualified, Form 8606 would be required. Enter 6000 on lines 19 and 21, and 7000 on line 22 and 0 on line 23. Then enter 6000 on line 4a of Form 1040. You still have a 1000 regular Roth contribution basis left to apply if you contribute to a Roth (or convert) in the future. Prior to 2018 the loss of 1000 upon total closure of all Roth accounts was eligible as a misc itemized deduction subject to 2% of AGI floor for all such misc deductions. But this deduction was sus...

Made an excess contribution to husband's Roth in 2021. Didn't realize it til December 2022. Filled out the form on Vanguard to have it removed in December 2022. They did it but just looked closely at the 1099 and they coded it as Q Qualified Distribution from IRA plan instead of 8 Excess distributions plus earnings/excess deferrals taxable in 2022. I called them this morning but they wouldn't talk to me without his permission. Am I doing this right? Is there anything I should ask them tomorrow when I call again? I wish I could just go to our local IRS office and ask them to walk me through everything. I feel like I'm over my head. Is it time to just go dump it all on an accountant? I was getting ready to fill out the 1040X but guess I will...

OP here. Sorry for any confusion. Account Titles at EJ are as follows. Statements for all three are mailed as one portfolio listed as "Portfolio for dead son's name" at top and addressed to dead son c/o 90 year old's name. Individual Retirement Account Select--dead son's name $331K (later called in EJ Documents Traditional IRA and Edwards Jones Trust Co As Cust/FBO dead son IRA C/O 90 year old) Single Account Select--90 year old's name $171K (later called in EJ documents "Single, TOD-Select") Individual Retirement Account Select-90 year old's name 19K (later called in EJ Documents Traditional IRA and "Edwards Jones Trust Co As Cust/FBO 90 year old's name IRA) At the top of each page under account holder dead son is...

Andrew321 wrote: ↑Tue Mar 14, 2023 6:21 pm Thanks so much! For ease of account management, can he roll this over into a traditional IRA?

Yes, anytime he wishes he can transfer the SEP balance into another IRA. Suggest direct transfer, not a 60 day rollover.

Long story short two jobs over allocated 2022 401k by around $1400. I noticed the error in early February 2023 so no big deal. Contacted employer and Fidelity to remove the excess contribution and that went well. Now this is where it gets interesting. Fidelity sent a check for around $1200. They then sent a letter stating the difference was because of losses on the contributions. It also said I’ll get two 1099-R in 2024. One showing the excess withdrawal and a second the loss. It said I should add the $1200 to my 2022 taxes as misc income, can then take the $200 loss as a subtraction from misc income on my 2023 taxes, and ignore the 1099-R. To me that sounds kind of weird and double dipping on the loss. Anyone else ever deal with this befo...

Almost there wrote: ↑Fri Mar 10, 2023 6:10 pm Never mind, I figured it out.

Almost there

Yes. An RMD is not reported by the custodian on Form 1099R any differently than any other distribution.
And you report the distribution on Form 1040, lines 4 or 5, just like any other distribution.

(b) Recharacterizations. If an amount is contributed to a Roth IRA that is a conversion contribution or failed conversion contribution and that amount (plus net income allocable to that amount) is transferred to another IRA (transferee IRA) in a subsequent year as a recharacterized contribution, the recharacterized contribution (plus allocable net income) must be added to the December 31 account balance of the transferee IRA for the year in which the conversion or failed conversion occurred. Therefore, RMDs or line 6 of Form 8606 when applicable should be based on the actual amount transferred back to the TIRA. There should be no attempt to calculate an imputed amount for the 12/31 value. So to use a real life example (mine!)... If the ori...

Thanks to everyone for the feedback! I feel better now about my plan to calculate the attributable income for 12/31/22, as if the recharacterization had occurred on that date. todthebod's quote from the form's instructions -- "Treat any recharacterized IRA contribution as though the amount of the contribution was originally contributed to the second IRA, not the first IRA." -- certainly seems to indicate that's a safe course of action, in the absence of any explicit instructions specific to this situation. And HeelaMonster, I'm grateful my lot is much simpler than yours! Form 6806 has almost done me in, too, and it's only been an hour or two for me.... :annoyed There are instructions in the Regs, but they were framed in the conte...

boater07 wrote: ↑Thu Mar 09, 2023 6:35 pm I would like to move TIRA assets to my Roth. Trying to figure out
how to coordinate with my RMDs. I usually do them late in the year
and want to do the rollover sooner.
Can I just pay tax on the transfer and do the rmd later?

No. You must complete the total RMD for all your TIRAs before converting any amount.
The reason being that the first distribution is deemed to apply to the RMD - and an RMD is not eligible for rollover. A conversion is a rollover. It does not matter when in the year you take your RMD, but you must complete it before converting.

I made a mistake. In early 2022, I made a prior year (2021) tIRA contribution. I meant to make a 2022 Roth IRA contribution. A few days later, I noticed the mistake... it had lost $8 in value by then. I made a recharacterization of the contribution from 2021 to 2022. A few days later, it had lost another $2 in value. I then did a full Roth conversion. My 1099-R shows the recharacterization and conversion. Neither should be taxable. My tax software says that the 2021->2022 recharacterization should be on an amended 2021 return. Do I need to go back and amend that return and add the contribution followed by the recharacterization? Or just leave it alone since nothing is taxable? To be clear, an IRA contribution year cannot be changed by rech...

If you overpaid your 2019 taxes, you only have 3 years from the date you filed your 2019 to file a 1040X and receive a refund. If you miss that deadline, the overpayment for 2019 is lost.

Covid exploded in March, 2020 and the tax due date was extended to 7/15, but when the IRS actually received your 2019 return is when the 3 year clock for amended return refunds starts.

Corrections of flawed 8606 forms always starts with the first year, since these forms are cumulative. But your deadline for 2019 may be very close, or if you filed early (like you contributed early), it may already be too late to secure the refund.

They can reclassify if the request is timely and no reporting has been done. They have done this many times before, but they are inconsistent.

In this case, you obviously can still make a 2023 contribution (even a 2022 contribution), and Form 5498 has not been issued for either year. You might tell VG that reclassification will save both of you the cost of processing and reporting the removal of an excess contribution.

In this situation it should not matter who was at fault for this error.

The chance of the IRS requesting documentation from you is somewhere between slim and nil, probably closer to nil.

The IRS has all the 5498 forms reporting your contributions so they can easily see that the 5 year holding period has been met.

I had two jobs in 2022 and contributed more than $20,500 to my 401(k) plans. I realized this in the middle of 2022 and reported it to the plan sponsor of my current job. The excess contribution was $2,000. I received the following: 1. Check for $1,900. 2. Letter explaining there had been a $2,000 over contribution with a $100 investment loss. 3. 1099-R for $1,900 with distribution code 8. 4. W2s showing a total deferral of $22,500. I am not sure how to report this on my taxes using turbotax. I added the 1099-R to turbotax and it added the $1900 to form 1040, line 1h. I am not sure if this is the correct way to report the excess deferral. I am worried the W2s sent to the IRS will show a $2,000 over contribution, but my 1040 will only show a...

These vague statements have been a continuing complaint by participants. The DOL should require that a clear breakdown be provided at the end of each plan year. That includes the cost basis of any employer shares eligible for NUA. Knowing how much of the balance is was distributable at year end (eg. rollover sub accounts) would also be helpful.

W-2 forms for each year provide coded breakdowns of pre tax and designated Roth elective deferrals, but that's entirely different than the actual total balance breakdown, particularly for long term employees where the balance is more affected by investment returns.

Presuming that MIL wants to increase her current income (and potentially reduce her estate) by buying a SPIA, I think that your plan is fine. Especially if her tax rate is lower than that of her heirs, it makes sense to fund the SPIA from an IRA. I have purchased an annuity with some of the funds in my Vanguard IRA. As a part of the annuity application process, MIL will sign an authorization for the insurance company to “pull” the premium from the IRA. Thank you, that is helpful. Is the premium that is pulled from the IRA just considered a rollover with no tax consequence? If the IRA annuity is purchased this year the 2023 RMD is known. She would subtract the annuitized payments received in 2023 from the total RMD and take the remainder fr...

Sec 327 of Secure 2.0 will provide for the surviving spouse beneficiary to elect to be treated as the owner, and therefore use the Uniform Table for RMDs.

But this provision does not go into effect until 2024.

6.6 is the correct single life table divisor for age 88.

While she could do a direct rollover to her own IRA, the 2023 RMD would have to be distributed first. Then starting in 2024 she could use the Uniform Table for her IRA RMD. Therefore, only 2023 would be subject to the higher RMD from the single life table.

The following is an IRS page explaining use of these forms:

https://www.irs.gov/forms-pubs/addition ... p-and-w-4r

For non periodic distributions where you might change your WH from distribution to distribution or from year to year, these firms should provide the phone or a website option to elect your WH%. You should not have to submit a paper form.

If you choose to roll over the loan offset amount or any portion of it, be sure to report the rollover contribution type (loan offset) to the IRA custodian because the IRA custodian must report these rollover contributions on Form 5498 with code "PO" entered in Box 13c.

The 1099R issued by the 401k should be coded M in Box 7. The IRA matching program will then compare the amounts from Form 5498 coded "PO" with 1099R forms coded M. If these forms are not issued correctly, an IRS inquiry is likely to follow.

So be sure to clearly ID rollover contributions of a loan offset with your IRA custodian.

Look how much time you have to use other money or savings accumulated over the next several months to complete a rollover of the defaulted loan. From the IRS site: What is a plan offset amount and can it be rolled over? A plan may provide that if a loan is not repaid, your account balance is reduced, or offset, by the unpaid portion of the loan. The unpaid balance of the loan that reduces your account balance is the plan loan offset amount. Unlike a deemed distribution discussed in (5), above, a plan loan offset amount is treated as an actual distribution for rollover purposes and may be eligible for rollover. If eligible, the offset amount can be rolled over to an eligible retirement plan. Effective January 1, 2018, if the plan loan offset...

And because it is taxable compensation he can make a 2023 IRA contribution, and if you are not working a spousal contribution for you.

OK, now I'm really confused. :confused I received the corrected 1099-R. It now has two lines of data inside each box. Box 1 shows $13,747.00 on the first line, with a code P distribution code in box 7. It shows $6873.50 on the second line, with a code 08 in box 7. What is the purpose of that first line showing $13,747? It's exactly double the amount that I withdrew in 2022. Why is it necessary? Couldn't Vanguard have just issued a corrected 1099-R with the code 08 in box 7 instead of the code P they first showed? I guess I need to show two separate 1099s in TurboTax, one for each line's info, right? The second line is correct and what they should have issued the first time. You are correct that normally the two lines should be treated as t...

windpig wrote: ↑Wed Mar 01, 2023 7:00 pm Thanks Alan for the reply.
I'm not sure what IRR is.
My wife will be 59.5 Sept of 2024. My thought was to roll over her pre taxed 401K to an IRA and also her Roth 401K to an IRA when she turns 59.5. I was led to believe a new 5 year clock would start at the point of the rollover, thereby limiting withdrawals to contributions only without penalty.

IRR = In Plan Roth rollover, ie rolling from the pre tax account including after tax non Roth contributions into the Roth 401k.

At 59.5, both the Roth 401k and her Roth IRA will be qualified, and no more basis tracking will be needed. However, there is no reason to wait until that time to rollover the 401k accounts.

DW is retiring in May She has a 401K at Fidelity with both pretax dollars and Roth dollars The Roth dollars started in 2019, so they meet the 5 year requirement in 2024 She has 3 Roth IRAs that are over ten years old, the one at Vanguard we have been contributing yearly to over the last few years in addition to her Roth 401K. I talked to Fidelity today and they said that no matter what, a new 5 year requirement starts when any of the Roth 401K is rolled over to any Roth IRA, even if that IRA has already meet the 5 year requirement. I may have mis understood what Fidelity was saying, but I tried to state what our situation was. In my reading, the 5 year requirement does not apply when you already have established and funded Roth IRAs that a...

Underpayment rates are now at 7% and likely headed higher. Therefore, both underpaying and overpaying will be more costly.

https://www.dol.gov/agencies/ebsa/emplo ... ment-rates

greenspam wrote: ↑Wed Mar 01, 2023 8:32 am I never get a refund.
Why give the govt an interest-free loan ???

Particularly now, when interest rates are high and rising. Why let the IRS collect interest on your money?
4000 refund @ 4.5% interest for average of 9 months = $135.

Things were much different a couple of years ago.

I'd like to transfer all of my Roth IRA funds from Etrade to Interactive Brokers, but could use some help on the most frugal way to do it. I want to transfer because (1) I'd like to consolidate accounts because I use IBKR for my non-tax advantaged account, and (2) IBKR pays much more interest for cash and I use futures, so this is significant. The main problem is that Etrade charges $75 for a full account transfer if I do an ACATS transfer that IBKR won't reimburse. What other options are there? Can I take an early distribution and deposit it within 60 days? What would the logistics of this look like? If you are thinking about a 60 day rollover, remember that you can do only one within a 12 month period. Do you have a rollover available, a...

Does your P coded 1099 R show any taxable income in Box 2a? And did you make a contribution IN 2021 for 2020? Box 2a is blank and no, I didn't make any contribution in 2021 for 2020. Depends on how anxious you are to file for 2022. There are two things the IRS looks for with these 1099R forms. 1) First priority is the taxable income and the year it should be reported. But since your Box 2a is 0 and would likely also be 0 in the corrected 1099R coded 8 that VG might issue, it really does not matter what year you would report 0 income for. 2) However, the second issue is that the IRS will get a 5498 showing that you made a 2022 contribution, but your 1099R coded P reflects removal of a contribution made in 2021, and there will not be one for...

I am not familiar with this type of arrangement. It is unusual. Per your description: 1) QRP money purchase plan was inherited 2) Assets other than the annuities were directly rolled into an inherited IRA at VG, subsequently transferred to Schwab 3) Arrangement between the plan and the insurance company holding the annuities was that annuity payouts per contract terms were to be transferred to the QRP, and in turn a direct rollover check from the QRP is being made payable to the inherited IRA now at Schwab. However, the inherited QRP is subject to beneficiary RMDs, and it is not clear whether RMDs are being distributed as required. 4) Checks from the QRP payable to the inherited IRA custodian are direct rollovers and not taxable, but they s...

Your RMDs are proportionate to the prior year end account balances.

For example, if you have 300k in the 403b at the end of 2023, an assumed RMD % of 4% for 2024 would result in a 12k RMD from the 403b.
And if you have 100k left in your IRA, your RMD would be 4,000. That would limit your QCDs to 4000 if you wanted QCDs to offset RMD taxes as much as possible.

You might use this example to substitute your actual assumed balances at the end of 2023 after the rollover to determine your RMD/QCD situation in 2024.

Correct.
Remember that if you want to make QCDs in the future, you cannot from a 403b.

Are you still working with the 403b provider and doing this rollover to further defer RMDs?

rick51 wrote: ↑Mon Feb 27, 2023 2:11 pm Turbo Tax seem to be telling me that a roller from an IRA to the Thrift Saving Plan is not allowed? Is this correct. You can roll to IRA from TSP but not IRA to TSP or another retirement plan to TSP only?

Since this rollover is clearly allowed (except for any basis in your IRA), you must be misinterpreting Ttax in some way.

No.
I was referring to a non reportable transfer between IRA accounts. You are instead planning a direct rollover to a qualified plan.

A direct rollover between an IRA and qualified plan is not a non reportable IRA to IRA transfer. It is treated as a reportable distribution and rollover (aka direct rollover). You will get a 1099R coded G. You cannot do this before completing your QCD/RMD without creating multiple violations.

The first $10,000 out of any IRA is your RMD. --vtMaps So, if I want all of that $10K to be a QCD I will need to do a $10K QCD from my source IRA before taking anything else from either IRA? correct :happy --vtMaps edit: but if you are going to take out MORE than the RMD, the money is fungible, you can take the QCD from whichever account you want whenever you want. Just make sure your total of all distributions (including QCDs) is greater than your $10,000 RMD. I'm actually concerned about making a rollover from one of my TIRAs, not a cash distribution. As I recall, you can't do a rollover until you have taken your RMD since that would be considered a re-investment of the RMD into a tax-deferred account which is not allowed. In this case, ...

Zillow does not know what updates were made to the home, the age of last roof replacement, pressure on seller to complete the sale, etc.

Therefore, the estimate easily could be off up to 25%. Their figures tend to be more accurate in a larger cookie cutter tract neighborhood with many nearly identical size homes on similar size lots, where you might assume several recent sales would average out between updated and non updated properties. Custom home neighborhoods with large homes built at different times would reflect estimates that are less accurate.

You can execute multiple partial conversions if you wish. They all get reported on a single Form 8606.

Better to convert incremental amounts because you can always convert more. But if you convert too much you are stuck with the tax bill because conversions can no longer be recharacterized.

Does your P coded 1099 R show any taxable income in Box 2a?
And did you make a contribution IN 2021 for 2020?

Correct that the disclaimer deadline has passed. Otherwise, this fact pattern would probably generate about 8 different answers if 10 people including the IRS were asked to comment on RMD requirements post Secure Act for successor beneficiaries. Her estate is the successor beneficiary of her inherited IRA. All successor beneficiaries (whether individuals or non individual entities (such as an estate) are subject to the 10 year rule, meaning that the inherited IRA must be drained by the end of 2031. If her mother passed prior to her RBD and the dates of death posted suggest that was likely the situation, the estate will have to take annual RMDs within in years 1-9 of the 10 year rule. Those annual RMDs are calculated by extending your wife's...